ARLINGTON, Va.-Following the signing of the bankruptcy reform legislation into law, charge-offs due to bankruptcy have been on the rise. While overall the percentage of charge-offs-as well as the percentage of those due to bankruptcy-was down in September, the number of bankruptcy-related charge-offs is up. During the month, total charge-offs dropped from 0.78% to 0.71% annualized of loans, according to NAFCU Senior Economist Jeff Taylor. Charge-offs from bankruptcy filings fell from 0.39% to 0.37%, which he said probably has more to do with the sampling of credit unions than the actual trend. "I think the October data will bear that out," he said. Taylor said he had seen an estimate that as many as 300,000 people filed bankruptcy the week before the new law came into effect. However, he believes that credit unions will not be hit as hard as banks and other lenders that are heavily involved in credit cards and other unsecured lending. Since the president signed bankruptcy reform into law in April, the dollar amount of charge-offs due to bankruptcy at credit unions has doubled. Credit unions experienced nearly $64 million in charge-offs in May. By June, that jumped to approximately $93.5 million and has risen steadily to $131.4 million in September. Charge-offs due to bankruptcies made up 46.8% of all charge-offs in September, up from 45.8% in August. Taylor explained that this increase was "largely because the total charge-offs went down." The one-percentage-point-increase is not necessarily statistically significant, but the overall trend is important for credit unions to watch, Taylor said. Beginning in May, just weeks after the bankruptcy reform legislation was signed into law, NAFCU data shows bankruptcy-related charge-offs came to 44.4% of total charge-offs; by July they peaked at 49.3%. After August's drop to 45.8%, the percentage went up again in September to 46.8%. -

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